The panel led by David Thodey and charged with reviewing financial relations between New South Wales and the Commonwealth has released its first discussion paper.
The review will examine the state’s revenue system in relation to Commonwealth funding arrangements, and will develop options for reform that will help NSW sustainably meet its funding needs over the long-term, according to the paper.
The panel will encourage “a more dynamic form of federalism”, state-led economic reform, and greater autonomy for NSW. It will provide the government with an assessment of feasibility and implementation issues, as well as a road map to overcome obstacles to successful reform.
NSW Treasurer Dominic Perrottet says the panel will investigate options for a fairer, more reliable system of federal funding that will benefit taxpayers in the long run.
“We have seen GST revenue eroded over time, have a complicated series of funding arrangements and partnerships with the Commonwealth, and face significant challenges as our population ages, technology advances and work patterns change,” he says.
“The challenge for the expert panel is to identify options and ways we can improve the system and at the same time ensure we maintain a stable and reliable revenue base to fund essential services and infrastructure into the future.”
While the review’s focus is NSW, the discussion paper notes that effective policy change will require a whole-of-tax-system assessment across the whole federation.
“The states’ options for reform need to factor in constitutional constraints. They must also be practically achievable,” the paper says.
“Careful consideration needs to be given to how changes to the tax mix impact different groups in society, including over the period in which they are being phased in. The states will need to work together with the Commonwealth to modernise the tax system. A revitalised approach would provide the necessary funding to deliver frontline public services, support productivity growth and carefully manage transitional impacts on individuals now and into the future.”
The paper poses seven questions for public consideration:
- Which state taxes impact citizen and business choices the most?
- Keeping the changing environment and the increasing volatility to state tax revenue bases in mind, how can the tax system work better for citizens and businesses and improve the economy for future generations?
- Is there a better way that the Commonwealth government can ensure its revenue sources remain sustainable in a changing environment?
- How can the states reduce their dependence on the Commonwealth?
- How can Commonwealth-state relations encourage states to innovate and reform?
- How can agreements between the Commonwealth and states ensure accountability for how the money is spent but allow flexibility to deliver the best outcomes for citizens?
- How can governments work better together and learn from each other, putting citizens at the centre of decision making?
The consultation findings will inform draft recommendations, and a final report, which will be published in 2020.
Appointed by Perrottet, Thodey will be joined by constitutional law expert Anne Twomey, former federal department head Jane Halton, former deputy prime minister John Anderson, University of Melbourne economics professor John Freebairn, and former New Zealand prime minister, Bill English.
Written submissions to the discussion paper are open until November 22.